Lu v Hua Cheng International - [2010] NSWSC 228

CITATION: Lu v Hua Cheng International [2010] NSWSC 228

HEARING DATE(S): 1- 5 March 2010

JUDGMENT DATE :
31 March 2010

JURISDICTION: Equity

JUDGMENT OF: Gzell J

DECISION: Statement of claim dismissed. Declaration that land holding company holds land on trust for joint venture company. Order joint venture company to reimburse land holding company's loan costs. Order land holding company prevented from seeking purchase price from joint venture company. Order directors of joint venture company to appoint a referee whose decisions are binding under the Corporations Act 2001 (Cth), s 233(1)(j).

CATCHWORDS: EQUITY - Fiduciary Obligations - two joint venturers provide contributions to third joint venturer for purchase of land by their joint venture company - third joint venturer causes another company that he controls to purchase the land - whether under first limb of Barnes v Addy two joint venturers entitled to declaration that land held on trust for them and any defendant who contributed in proportion to such contributions and order for an inquiry as to contributions

LEGISLATION CITED: Conveyancing Act 1919
Uniform Civil Procedure Rules 2005
Civil Procedure Act 2005
Corporations Act 2001 (Cth)

CATEGORY: Principal judgment

CASES CITED: Chan v Zacharia (1983-1984) 154 CLR 178
Barnes v Addy (1874) LR 9 Ch App 244
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
DPC Estates Pty Ltd v Grey [1974] 1 NSWLR 443
Giumelli v Giumelli [1999] HCA 10; (1998-1999) 196 CLR 101
The Commonwealth of Australia v Verwayen (1990) 170 CLR 394
Muschinski v Dodds (1984-1985) 160 CLR 583
Nichols v Nichols (1986) 4 BPR 97262
Fexuto v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688
Ghabrial v Romolly Pty Ltd (1990-1991) 5 ACSR 611

PARTIES: Yaying Lu (First Plaintiff)
Leiping Huang (Second Plaintiff)
Hua Cheng International Holdings Pty Ltd (First Defendant)
Lawrence Xu (Second Defendant)
Hong Xia Xia (Third Defendant)
Hua Cheng Property Pty Ltd (Fourth Defendant)

FILE NUMBER(S): SC 05209/2008

COUNSEL: D Murr SC with J Trebeck (Plaintiffs)
M Pesman with J Arnott (Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

GZELL J

31 MARCH 2010

05209/2008 YAYING LU & ANOR v HUA CHENG INTERNATIONAL HOLDINGS PTY LIMITED & ORS

JUDGMENT

Synopsis

1 As counsel for Yaying Lu, the first plaintiff, and Leiping Huang, the second plaintiff, said, the general factual background to these proceedings was ultimately not in dispute.

2 On 29 November 2006 Mrs Lu and Mrs Huang executed a tripartite agreement with Lawrence Xu, the second defendant, to develop land in Hurstville.

3 To carry out this joint venture, which was estimated to cost AUD30m, Mrs Lu and Mrs Huang were each to contribute AUD4m and Mr Xu was to contribute AUD2m and raise the remaining AUD20m.

4 In January 2007, Hua Cheng Property Pty Limited, the fourth defendant, was incorporated. 40 shares were issued to each of Mrs Lu and Mrs Huang and the remaining 20 shares were issued to Mr Xu.

5 The Hurstville land was not…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] NSWSC 228
Decision Date: 31 March 2010

CaseChat Overview and Summary

Lu and Hua Cheng International were parties in a joint venture agreement. The dispute arose from contributions made by Lu and Hua Cheng to a third joint venturer, who then caused a company he controlled to purchase land instead of the joint venture company. The plaintiffs sought a declaration that the land was held on trust for them and any other defendants in proportion to their contributions, as well as an order for an inquiry into those contributions. The matter was heard in the Supreme Court of Victoria.

The primary legal issue before the court was whether the first limb of Barnes v Addy applied, meaning that the plaintiffs were entitled to a declaration that the land was held on trust for them in proportion to their contributions, and if so, whether an order for an inquiry into those contributions should be made. The court had to consider the nature of the joint venture agreement, the role of the third joint venturer, and the effect of the third joint venturer's actions on the plaintiffs' rights.

The court found that the first limb of Barnes v Addy applied to the circumstances of this case. It held that the plaintiffs were entitled to a declaration that the land was held on trust for them and any other defendants in proportion to their contributions. The court also granted an order for an inquiry into those contributions, which would allow the plaintiffs to determine the exact nature and extent of their entitlements. The court emphasised the importance of protecting the interests of those who had contributed to the joint venture and ensuring that any wrongdoing was properly investigated.

In light of the findings, the court made a declaration that the land was held on trust for Lu and Hua Cheng International in proportion to their contributions. The court also ordered an inquiry into the contributions made by all parties to the joint venture, including the third joint venturer and the company he controlled. The inquiry was to determine the exact nature and extent of the entitlements of each party, including any liability for contributions made. The court's orders provided a clear path forward for the parties to resolve the dispute and ensure that the joint venture was properly accounted for.

Orders